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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: BGR who wrote (109297)	3/12/1999 6:18:00 PM
From: Michael Bakunin	Read Replies (2) \| Respond to of 176387

Bukun, Thanks for the well-reasoned response. Any model is just as good as the data that goes into it. Not only are all models subject to the GIGO bugbear, but long-term models like mine are especially fallible. [20%/5 years] counters every single published estimate Yes, that's my point. I think street consensus is 35%. Unless you expect the growth of the high-tech industry to slow to low single figures as well, this is not very plausible. The high tech industry is presently growing in the mid teens. Well, it has to slow eventually, because at some point it becomes the economy (viz automobiles earlier this century). If it's growth slows down to match your expectations, the US economy will probably be in a recession. I disagree; all it takes is margin pressure. I expect unit growth, but flattening industry revenues and general oversupply, pressuring margins fiercely and cramping Dell's growth. I agree my model was overly simplistic. However, Dell's price is so high, even an optimistic multistage model shows the risks. Following five high growth years, take ten growth years of 15%, twenty mature years of 5%, then GDP growth. If GDP stays at 2.5%, and revenues grow with EPS, then consensus results for the next five years imply Dell's revenues will be 4% of GDP in 35 years. GM's are now 2%. Even with these rosy latter 30 years, consensus implies returns of 11%; the high end of your range, 14%; my forecast, 9.0%. Mere mild optimism (35%-10%-4%-GDP) gives Dell GM-like size eventually, but discounted at 11%, PV is $30. The only way Dell is undervalued is if they blow the doors off growth for the next thirty five years, or if you'll take Chuzz's 6.5%. mb